Highlights
· Order intake at constant exchange rates grew by 7% to € 2.3 million over H1 2011
· Net revenue decreases 7% to € 4,165 thousand due to difficult market circumstances and weak dollar
· LOFT revenues continued to grow with significant backlog
· Net result down to € 1,315 thousand negative (H1 2010: € 658 thousand negative) due to new product innovation expenses and depreciation
· Financing secured for growth strategy in June 2011; EGM to be held 7 September
· Full focus on execution of buy & build strategy in second half of 2011

Key Figures
Results from continued operations (in € 1,000)H1 2011H1 2010
Net revenue4,1654,494
Gross profit4,0204,366
Operating result(1,196)(423)
Net result(1,315)(658)
Cash flow614(368)
Earnings per share (€)(0.10)(0.07)

Pieter Aarts, CEO of NedSense: “We are operating in very turbulent market circumstances. The economic and political situations are negatively influencing the Fashion and Textile industry and are also affecting our revenues and profit. Nevertheless, our largest division NedGraphics was able to gain market share, and we realized a number of successes with our innovative product suite LOFT. Our order intake continued to grow over the past half year. We are witnessing a fragile recovery of sales in traditionally strong textile countries such as the US, Egypt, Italy and Portugal, while emerging regions, including South America and China, show a continued growth into the first half of 2011. Amidst all this turmoil, we have been able to secure the financing for our buy & build strategy and we are looking at acquisition opportunities. In the second half of the year, we will fully focus at the execution of our growth strategy.”
Revenue and order intake
Net revenue decreased by 7% in the first half of 2011 to € 4,165 (H1 2010: € 4,494), mainly due to a decrease of new software sales. At constant exchange rates, the decrease amounted to 5%. Net revenue of NedGraphics decreased by 4% to € 3,804 thousand (H1 2010: € 3,962 thousand), mainly to a decrease in software sales. Nevertheless, NedGraphics again gained market share in the first half of 2011. Revenues from Dynamics Perspective decreased from € 474 thousand in the first half of 2010 to € 283 thousand in the first half of 2011, mainly due to a decrease in consulting revenue. The LOFT division increased its revenue to € 78 thousand in the first half of 2011 (H1 2010: €58 thousand), showing the potential of this innovative division.
Income from maintenance contracts totaled 52% of total revenue for the first half of 2011. Compared to the first half of 2010, income from maintenance has remained constant at € 2.2 million. At constant exchange rates, maintenance income increased by 4%, mainly achieved by NedGraphics, following its strong growth in market share in 2010. The maintenance income from Dynamics Perspective decreased in the first half of 2011, as anticipated due to the strategic decision to become reseller for PTC .
The number of orders placed in the first half of 2011 confirms that sales dynamics continue to improve. Orders had already risen significantly in 2010, and the overall order intake has now risen by 5%, or 7% at constant exchange rates, to € 2.3 million. The increase in order intake mainly took place at the LOFT division, totaling € 233 thousand, an increase of 133% compared to the first half of 2010, or over 146% at constant exchange rates. Following strong growth in 2010, order intake for NedGraphics has remained constant, as has the order intake for Dynamics Perspective.
The EMEA countries in particular, accountable for 63% of the total order intake, have noted a substantial growth of 11% with a marked increase in China of over 60%. The Americas reported an increase in order intakes of 2% for the first half of 2011.
Operating expenses and net result
Operating expenses excluding amortization and depreciation increased by 16% to € 5,646 thousand, partly due to the increase in capitalized production and partly to non-capitalized investments in software development. Operating expenses in the first half of 2011 included € 95 thousand for share-based, equity settled payments. Depreciation of intangible fixed assets resulting from increased investments in software development, particularly LOFT but also for NedGraphics, increased by 16% to € 880 thousand in the first half of 2011 compared to € 758 thousand in the first half of 2010.
Net result for the first half of 2011 came in at € 1,315 thousand negative (first half 2010: €658 thousand negative). Due to the increase in investments in software development, in combination with lower revenues, NedGraphics’ net result decreased to € 173 thousand negative in the first half of 2011 (first half 2010: € 209 thousand positive). Dynamics Perspective contributed € 100 thousand negative to the result (first half 2010: € 55 thousand positive). The net result of the segment Other within the holding company, which includes the results of the LOFT activities, increased from a loss of € 900 thousand in the first half of 2010 to a loss of € 1,016 thousand in the first half of 2011.
Growth strategy and financing
In the first half of 2011, NedSense secured the financing necessary for its buy & build strategy. Selective acquisitions are targeted to complement autonomous growth, aimed at increasing NedSense’s global footprint and acquiring distribution channels in Europe and the United States for LOFT. NedSense is in exploratory talks for a number of possible acquisitions.
NedSense is focused on further developing LOFT, and launched LOFT @iPad, an application of LOFT running on the Apple iPad in April. This fall, this will be followed by the launch of LOFT @Web and LOFT-as-a-Service (SaaS), which will enable customers to run the technology through a subscription-based service. A direct and indirect sales approach will bring the SaaS application to a global target market of interior designers, real estate agents and end-consumers. The retention of the technological advantage in the market is clear. As a spin-off from the LOFT @iPad developments, an iPad application is currently being developed for the NedGraphics CAD/CAM product suite. NedGraphics continues to invest in new functionality so as to maintain its leading position in the market.
In June 2011, a provisional financing agreement was reached with the Company’s existing major shareholders and Project Holland Fonds. The financing is divided into a private placement of shares, a issuance of convertible bonds and a non-transferable stand-by convertible loan. These arrangements provide NedSense with financing totaling a maximum of € 7.0 million. The amendment of the articles of association, necessary for these transactions to come into effect, will be put before the shareholders on an EGM on 7 September. The proceeds from the transactions will be used for repayment of loans, acquisitions, investments in LOFT, and other investments in line with the its current activities. Now that the financing is in place, NedSense will fully focus on executing its buy and build strategy in the second half of the year.
Cash flow and balance sheet
Operational cash flow in the first half of 2011 declined to € 16 thousand negative (H1 2010: € 686 thousand positive), mainly due to the decreased revenue and increased operating expenses. Cash flow from investments in the first half of 2011 was € 1,370 thousand negative (first half 2010: € 1,054 thousand negative) due to increased investments in software development. The receipt of an equity bridge loan from Project Holland Fonds led to a positive cash flow from financing in the first half of 2011 of € 2,000 thousand positive (first half 2010: € 0). The total change in cash and cash equivalents in the first half of 2011 amounted to € 614 thousand positive (first half 2010: € 368 thousand negative).
Fixed assets increased from € 9,249 thousand as of year-end 2010 to € 9,728 thousand at the end of H1 2011. This increase is mainly due to the increased investments in software development for both the new LOFT product line and NedGraphics.
Shareholders’ equity decreased from € 5,125 thousand as at 31 December 2010 to € 3,938 thousand as of 30 June 2011, due to the net effect of the net loss over the period, the foreign currency translation differences and their effect on the carrying value of US subsidiaries, and the share-based equity settled compensation expenses. As a result of these changes, solvency decreased to 28.5% at 30 June 2011, from 36.9% at 31 December 2010.
Outlook
In the second half of 2011, we will continue the deployment of our strategic growth plan for the coming four years. Acquisitions will be aimed at increasing NedSense’s global footprint and acquiring and expanding distribution channels in Europe and the United States for LOFT. Besides through acquisitions, NedSense is also committed to grow LOFT autonomously. It is focused on further developing LOFT with several important milestones for the rollout in 2011. Growth acceleration and investments in product innovation is essential to maintain the current competitive advantage and secure corporate autonomy. Through our buy & build strategy, we will gain and sustain market leadership in our chosen target markets.
Our strategy is to continue to develop our sales and marketing efforts, maintain our market knowledge, and sustain our customer base and maintenance contracts, while looking for more opportunities to expand beyond the niche in which we currently operate.
Half year report 2011
The official half year report 2011, as obliged and in accordance with the EU Transparency Directive has been made available today on the corporate website of NedSense (www.nedsense.com).